Greece gets time

euro
“Why an adamant Germany finally relented..”

It may not be victory for the Greeks but surely it will go down as a personal triumph for Alexis Tsipras. The man, who came to power by promising to abandon austerity, has got a 4-month extension of his credit line. While it may not solve the problems of Greece, they at least have time to think, strategize and chalk out a credible game plan. But the question is why did Germany and the wealthy North finally relent?

Weak define the strong…

Germany and Northern Europe realize that they need the weaker PIGS nations to keep the Euro weak. That makes European exports competitive; or how else did Germany build a $1 trillion export basket. If the weaker nations are ejected or if the Euro crumbles, the biggest losers would be Germany and the Northern Europeans. Alexis Tsipras knows that well but Angela Merkel knows it even better.

Beware the domino effect…

That is surely a situation Germany would have liked to avoid. Despite the Germans thumping on “Let Greece go”, there had bigger worries. If Greece had exited the Euro and failed it would have been bad. On the contrary, if Greece had exited the Euro and emerged stronger, it would have been disastrous for the Euro. Then it would have led to the rise of Syriza like movements across nations like Spain, Portugal and Italy.

Eventually, France, despite its affinity to Germany, may be next on the line.

Geopolitics scores, eventually…

If there was one factor that weighed in favor of giving leeway to Greece, it would have been geopolitics. With Alexis Tsipras and Vladimir Putin making overtures to each other, the deal was never a secret. Germany and NATO feared that an ejection from the Euro would virtually cut off Greece from Europe and push them closer to Russia. With Russia already having full control over the Black Sea (thanks to Odessa), the NATO would be loathe to see Putin on the Mediterranean too. Considering Greece’s position in the confluence of Asia, Europe and Africa it was surely special. That may have finally tipped the scales in favor of Greece.

But Greece’s problems are far from over. It has a balancing act to do. On the one hand it needs to satisfy the EU lenders that the Greek economy is headed in the right direction. Probably, Germany also realizes that choking Greece under austerity is not an economic answer. Greece has a story to tell its voters; that they took on the big boys without compromising the popular mandate. So for the time being Greece stays and the single currency also stays. But the bigger challenging is rethinking the Euro. Reckless indebtedness and conservative wealth creation cannot co-habit together for too long! ©

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: